Cappin' Crunch: DOJ Investigating Data Cap Abuse

Cable television companies want you to watch cable television. More to the point, they don't want you to cancel your cable subscription and give that money to online purveyors of televised entertainment -- Netflix, Hulu, etc. But that's business, right? Companies compete with each other, and consumers make their choices based on quality of service.

Not exactly.

Cable companies like Comcast and Time Warner are also internet service providers. They control the pipes, as such they have the means and the incentive to encourage you to consume cable TV, and discourage you from seeking out online streaming video. Are they engaging in such wildly anticompetitive activities? The Justice Department aims to find out.

Certain cable/internet providers have for a few years now imposed monthly caps on the amount of data their broadband subscribers can consume. In 2008, Comcast imposed a 250 gigabyte monthly cap on their residential users in order to cut back on "excessive" usage. Comcast argued that 250 gigabytes was likely more data than you could possibly need on a monthly basis, but it was nonetheless a cap, a barrier to usage. Even if you were unlikely to bump up against it, you still knew it was there.

The concern is that the cable companies are leveraging those caps to keep their competitors down. In March, Comcast announced that their Xfinity streaming video service would be available on Microsoft's Xbox 360, and it would be exempt from the data cap. The cable provider was obviously prioritizing their own content: watch Netflix and have it count against the cap, or watch Xfinity, data cap be damned. Online streaming video providers were apoplectic. Netflix CEO Reed Hastings whacked Comcast, writing that they "should apply caps equally, or not at all."

Net neutrality advocates also sounded the alarm. Sen. Al Franken (D-MN) asked the FCC to investigate whether Comcast is violating the Open Internet Order or the terms of its 2010 merger with NBC Universal. Gigi Sohn of Public Knowledge called Comcast's ploy "exactly the type of situation the Federal Communications Commission's (FCC) rules on the Open Internet were designed to prevent." In May, Comcast announced changes to their usage policies, eliminating the data cap and allotting users 300 GB per month with the option to purchase additional data.

Regardless, DOJ is now reportedly on the case, to the delight of consumer advocates and the dismay of cable companies. Online streaming video is a competitive threat to established cable providers, but because those same cable providers control access to online streaming video sites, they are uniquely situated to stifle their competitors. And it has nothing to do with consumer choice or quality of service. As GigaOm's Stacy Higginbotham put it: "An entire market is undergoing disruption because of the Internet, and cable providers are trying to use their dominant position to halt that innovation."